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The DXY Index is currently consolidating within a tight range of 97.4-98.0 due to a standoff between resilient US economic data and high policy uncertainty in the White House. While the index has rebounded from its four-year low of 95.55 in January, it has lacked the momentum to break above the 98-resistance level. The index’s stuck nature of the index is attributed to several conflicting factors, and investors hope to find clarity in US President Donald Trump’s State of the Union address this morning. Following a Supreme Court ruling against Trump’s IEEPA tariff authority and his subsequent decision to raise tariffs to 15% under Section 122, investors have hesitated. Markets fear Trump could unveil new and aggressive trade measures that could reignite inflation and disrupt supply chains. Anxiety remains high regarding his intentions on Iran and potential interference with Fed governance.
Meanwhile, Boston Fed President Susan Collins reaffirmed the Fed’s narrative that interest rates will likely remain on hold for some time, characterizing current monetary policy as 'mildly restrictive' and appropriate as labour market risks diminish while inflation remains above 2%. This guidance prompted the futures market to shift its expectation for the next rate cut from June to September. Despite this hawkish repricing, a significant flight to safety – fuelled by Middle East geopolitical tensions, AI sector de-risking risks, and renewed tariff uncertainty – capped the 10Y US Treasury yield at 4.30%, eventually driving it down by 20.7 bps to 4.03% this month.
The market remained cautious despite the US Conference Board's February 2026 report showing consumer confidence rising to 91.2, up from an upwardly revised 89.0 in January. The rise was driven by an increase in short-term expectations for income, business, and labour conditions to 72 from 67.2. Despite the rise, the expectations index remained below the 80 threshold, which historically signalled a recession ahead. The present Situation Index decreased by 1.8 points to 120, reflecting a slightly more pessimistic assessment of current business and employment conditions compared to the previous month. Consumers remained primarily concerned about prices, inflation, and the cost of goods. Mentions of trade and politics also increased in February.
Quote of the Day
"Price is what you pay, Value is what you get!”
Warren Buffett
February 25 in history
The US Congress passed the First Legal Tender Act of 1862, authorizing the United States note (greenback) into circulation, the first fiat paper money that is legal tender in America.
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